Long guts
Buy an in-the-money call and an in-the-money put: a strangle built from the inside.
Big move2 legsDebit
Illustrative: underlying at 100, strikes every 2.5, 45 days to expiry, implied volatility 25%, model prices. One lot = 100 shares.
Key figures
| Opens for | a debit of $1,139 |
|---|---|
| Max profit | Open-ended as the price rises |
| Max loss | −$389 |
| Break-evens | 93.61 and 108.89 |
| Position delta today | −2 shares |
| Outlook | Big move |
The legs
| Action | Quantity | Option | Model price |
|---|---|---|---|
| Buy | 1 | 97.5 call, 45 days | 5.18 |
| Buy | 1 | 105 put, 45 days | 6.21 |
How it works
Buy an in-the-money call and an in-the-money put: a strangle built from the inside. These structures care more about how far the price moves than which way. Long versions pay when the move is large; short versions collect premium when the price stays put.
When it fits
It suits a view that the underlying moves a long way, in either direction or the direction the structure leans to, before expiry.
What can go wrong
The most it can lose at expiry in this example is −$389. Bought options lose value as time passes, so the move has to come before expiry.
Building it in Trident
In the Strategy Lab, choose long guts and the days to expiry. Trident applies these strike rules to your live chain, prices each leg and draws the trade on the risk graph, where you can drag the days to expiry, change implied volatility or switch on the crash band. When it looks right, send it to order management; nothing reaches your broker until you send it.
Frequently asked questions
What is a long guts?
Buy an in-the-money call and an in-the-money put: a strangle built from the inside.
What is the maximum loss on a long guts?
In this illustrative example it is −$389 for one lot at expiry.
Where does a long guts break even?
With the underlying at 100 in this illustrative example, the break-even at expiry is 93.61 and 108.89.
Can I build a long guts in Trident?
Yes. Pick it in the Strategy Lab and Trident chooses the strikes from your live chain, prices the legs and draws it on the risk graph.
Illustrative example with model prices, not a recommendation. Options carry risk of loss. See the risk disclosure.